KEY CHALLENGES IN EARLY-STAGE SOFTWARE STARTUPS
KEY CHALLENGES IN EARLY-STAGE SOFTWARE STARTUPS Carmine Giardino1 Sohaib Shahid Bajwa1 Xiaofeng Wang1 Pekka Abrahamsson2 1Free
University of Bozen – Bolzano Bozen – Bolzano, Italy
2Norwegian
University of Science and Technology, Trondheim, Norway
INTRODUCTION – 1/3
Startup companies are unique [1]: Little or no operating history Limited resources Multiple influences Dynamic technologies and markets
2
INTRODUCTION – 2/3 60%
of startups do not survive in the first five years [2] 75% of venture capital funded startups fail [2] Little rigor and relevance exist in the studies about software startups [3] Do not focus on investigating issues and challenges [3]
3
INTRODUCTION – 3/3 Early-stage
software Startups
Young and immature Small in size
4
RESEARCH QUESTION AND APPROACH
What are the key challenges that early-stage software startups face?
Survey
List of top 10 challenges
Case Study 5
RESEARCH QUESTION AND APPROACH
What are the key challenges that early-stage software startups face?
Survey
List of top 10 challenges
Case Study 6
SURVEY – 1/6
Purpose: To obtain a general overview of challenges that early-stage software startups face
A web-based survey advertised by means of blogs etc. Multiple Choice Questions (MCQs) having following parts:
Introduction Background information Learning and product development status Challenges
7
SURVEY – 2/6 Survey Description
Description
# of Responses
# of responses received
8240
Complete responses (background information and perceived challenges)
5389 (65,40%)
List of top 10 challenges
Contained in 4709 responses, i.e.87,38% of the 5389 complete responses
List of key challenges by frequency calculation.
8
SURVEY – 3/6
90 countries around the world
United States 52,60% Canada 7,94% United Kingdom 6,71% Israel 5,30% India 4,50%
Cover different market sectors (predominately in the consumer market, such as mobile and Internet, i.e. 64,40%). Young, on average 10 months, and small in size, predominantly having 2 founding members.
9
SURVEY – 4/6 List of top 10 key challenges of early-stage software startups Thriving in Technology Uncertainty Acquiring First Paying Customers Acquiring Initial Funding Challenges
Building Entrepreneurial Teams Delivering Customer Value Managing Multiple Tasks
Defining Minimum Viable Product Targeting a Niche Market Staying Focused and Disciplined
Reaching the Break-even Point 0
200
400
600
800
# of Responses
1000
1200
10
SURVEY – 5/6 63,98%
challenges are perceived during problem evaluation phase
48,23%
challenges are perceived when product become mature
11
SURVEY – 6/6
Macmillan et al. Dimensions and challenges(%) Dimension
Challenges (%)
Market
31,32
Product
30,56
Financial
17.90
Team
20.22 12
RESEARCH QUESTION AND APPROACH
What are the key challenges that early-stage software startups face?
Survey
List of top 10 challenges
Case Study 13
RESEARCH QUESTION AND APPROACH
What are the key challenges that early-stage software startups face?
Survey
List of top 10 challenges
Case Study 14
CASE STUDY – 1/7
Purpose:
Achieve a deeper contextual understanding of the key challenges identified in the survey.
15
CASE STUDY – 2/7 Profile of two early-stage software startups Profile
EasyMedicine
MovyNext
Idea/Business domain
Health
Entertainment
When started
Idea: July 2013, Development: November 2013
Idea: July 2012, Development: December 2013
No. of founding team members
4
4
Current composition of team
2 (Pharmacists), 2 (Businessmen)
1 mentor (from an incubator), 4 Software developers, 1 designer (Free lancer)
Current Product Development Stage
Mature
Prototype
Current Learning Process Stage
Solution evaluation
Solution Evaluation
Application Nature
Android Mob app
16
Website
CASE STUDY – 3/7 THRIVING IN TECHNOLOGY UNCERTAINTY
EasyMedicine: Manifested as lack of supporting technologies
“Our search criteria to find medicine
was not efficient. We wanted to implement multiple search criteria with optimized search within the database, but we were unable to implement it because of not enough resources available for these problems.” (CEO)
17
CASE STUDY – 4/7 ACQUIRING FIRST PAYING CUSTOMER
MovyNext: No specific strategy to attract paying customers:
“You think that your product is cool. Friends are using it, and that's it. Paying customers are not coming. How to get this? that's a challenge” (CEO)
18
CASE STUDY – 5/7 BUILDING ENTREPRENEURIAL TEAM
Implies several challenges related to
teamwork and team motivation appropriate composition of the team
EasyMedicine:
It was about keeping people involved:
“We did not update our developer for the past two months. We lost him and he took another assignment. He is not available anymore". (CEO) 19
CASE STUDY – 6/7 BUILDING ENTREPRENEURIAL TEAM
MovyNext:
“We are all computer scientists. There is no one, who work on user experience. To build product/feature, this is one part of the business. You need people, that market it, sell it, reach to customer, perform user based experiment. In our case, we don't have them.” (CEO) 20
CASE STUDY – 7/7 ACQUIRING INITIAL FUNDING
EasyMedicine:
“It's a challenge especially in a small city. There are not so many people to invest in startups if there is not a clear product/business plan. In software business, it is more challenging. You can create, change, and revolutionize several times. There were many apps similar to our app in our case” (CEO)
21
DISCUSSION No
validated learning process to identify the real need of the customers High number of challenges in problem evaluation phase Investing resources in ineffective practices. Identifying the valuable but missing knowledge early in the project
22
CONCLUSIONS An
initial explanation of the key challenges in early-stage software startups Top challenges: Thriving in technology uncertainty (21,01%) Acquiring first paying customers (16,14%)
Lack
of validated learning process
23
FUTURE WORK
Relationship between
described challenges, and other factors (e.g. user growth rate)
Improving validated
learning
processes 24
REFERENCES [1] Sutton, Stanley M. "The role of process in a software startup." IEEE Software 17.4 (2000): 33-39. [2] Nobel, C.: Why companies fail-and how their founders can bounce back. Working Knowledge, Harvard Business School, Boston, available at: http://hbswk.hbs.edu/item/6591.html (accessed 29 August 2013) (2011) [3] Paternoster, N., Giardino, C., Unterkalmsteiner, M., Gorschek, T., Abrahamsson, P.: Software development in startup companies: A systematic mapping study. Information and Software Technology forthcoming. 25
THANK YOU!!
University of Bozen – Bolzano Bozen – Bolzano, Italy
2Norwegian
University of Science and Technology, Trondheim, Norway
INTRODUCTION – 1/3
Startup companies are unique [1]: Little or no operating history Limited resources Multiple influences Dynamic technologies and markets
2
INTRODUCTION – 2/3 60%
of startups do not survive in the first five years [2] 75% of venture capital funded startups fail [2] Little rigor and relevance exist in the studies about software startups [3] Do not focus on investigating issues and challenges [3]
3
INTRODUCTION – 3/3 Early-stage
software Startups
Young and immature Small in size
4
RESEARCH QUESTION AND APPROACH
What are the key challenges that early-stage software startups face?
Survey
List of top 10 challenges
Case Study 5
RESEARCH QUESTION AND APPROACH
What are the key challenges that early-stage software startups face?
Survey
List of top 10 challenges
Case Study 6
SURVEY – 1/6
Purpose: To obtain a general overview of challenges that early-stage software startups face
A web-based survey advertised by means of blogs etc. Multiple Choice Questions (MCQs) having following parts:
Introduction Background information Learning and product development status Challenges
7
SURVEY – 2/6 Survey Description
Description
# of Responses
# of responses received
8240
Complete responses (background information and perceived challenges)
5389 (65,40%)
List of top 10 challenges
Contained in 4709 responses, i.e.87,38% of the 5389 complete responses
List of key challenges by frequency calculation.
8
SURVEY – 3/6
90 countries around the world
United States 52,60% Canada 7,94% United Kingdom 6,71% Israel 5,30% India 4,50%
Cover different market sectors (predominately in the consumer market, such as mobile and Internet, i.e. 64,40%). Young, on average 10 months, and small in size, predominantly having 2 founding members.
9
SURVEY – 4/6 List of top 10 key challenges of early-stage software startups Thriving in Technology Uncertainty Acquiring First Paying Customers Acquiring Initial Funding Challenges
Building Entrepreneurial Teams Delivering Customer Value Managing Multiple Tasks
Defining Minimum Viable Product Targeting a Niche Market Staying Focused and Disciplined
Reaching the Break-even Point 0
200
400
600
800
# of Responses
1000
1200
10
SURVEY – 5/6 63,98%
challenges are perceived during problem evaluation phase
48,23%
challenges are perceived when product become mature
11
SURVEY – 6/6
Macmillan et al. Dimensions and challenges(%) Dimension
Challenges (%)
Market
31,32
Product
30,56
Financial
17.90
Team
20.22 12
RESEARCH QUESTION AND APPROACH
What are the key challenges that early-stage software startups face?
Survey
List of top 10 challenges
Case Study 13
RESEARCH QUESTION AND APPROACH
What are the key challenges that early-stage software startups face?
Survey
List of top 10 challenges
Case Study 14
CASE STUDY – 1/7
Purpose:
Achieve a deeper contextual understanding of the key challenges identified in the survey.
15
CASE STUDY – 2/7 Profile of two early-stage software startups Profile
EasyMedicine
MovyNext
Idea/Business domain
Health
Entertainment
When started
Idea: July 2013, Development: November 2013
Idea: July 2012, Development: December 2013
No. of founding team members
4
4
Current composition of team
2 (Pharmacists), 2 (Businessmen)
1 mentor (from an incubator), 4 Software developers, 1 designer (Free lancer)
Current Product Development Stage
Mature
Prototype
Current Learning Process Stage
Solution evaluation
Solution Evaluation
Application Nature
Android Mob app
16
Website
CASE STUDY – 3/7 THRIVING IN TECHNOLOGY UNCERTAINTY
EasyMedicine: Manifested as lack of supporting technologies
“Our search criteria to find medicine
was not efficient. We wanted to implement multiple search criteria with optimized search within the database, but we were unable to implement it because of not enough resources available for these problems.” (CEO)
17
CASE STUDY – 4/7 ACQUIRING FIRST PAYING CUSTOMER
MovyNext: No specific strategy to attract paying customers:
“You think that your product is cool. Friends are using it, and that's it. Paying customers are not coming. How to get this? that's a challenge” (CEO)
18
CASE STUDY – 5/7 BUILDING ENTREPRENEURIAL TEAM
Implies several challenges related to
teamwork and team motivation appropriate composition of the team
EasyMedicine:
It was about keeping people involved:
“We did not update our developer for the past two months. We lost him and he took another assignment. He is not available anymore". (CEO) 19
CASE STUDY – 6/7 BUILDING ENTREPRENEURIAL TEAM
MovyNext:
“We are all computer scientists. There is no one, who work on user experience. To build product/feature, this is one part of the business. You need people, that market it, sell it, reach to customer, perform user based experiment. In our case, we don't have them.” (CEO) 20
CASE STUDY – 7/7 ACQUIRING INITIAL FUNDING
EasyMedicine:
“It's a challenge especially in a small city. There are not so many people to invest in startups if there is not a clear product/business plan. In software business, it is more challenging. You can create, change, and revolutionize several times. There were many apps similar to our app in our case” (CEO)
21
DISCUSSION No
validated learning process to identify the real need of the customers High number of challenges in problem evaluation phase Investing resources in ineffective practices. Identifying the valuable but missing knowledge early in the project
22
CONCLUSIONS An
initial explanation of the key challenges in early-stage software startups Top challenges: Thriving in technology uncertainty (21,01%) Acquiring first paying customers (16,14%)
Lack
of validated learning process
23
FUTURE WORK
Relationship between
described challenges, and other factors (e.g. user growth rate)
Improving validated
learning
processes 24
REFERENCES [1] Sutton, Stanley M. "The role of process in a software startup." IEEE Software 17.4 (2000): 33-39. [2] Nobel, C.: Why companies fail-and how their founders can bounce back. Working Knowledge, Harvard Business School, Boston, available at: http://hbswk.hbs.edu/item/6591.html (accessed 29 August 2013) (2011) [3] Paternoster, N., Giardino, C., Unterkalmsteiner, M., Gorschek, T., Abrahamsson, P.: Software development in startup companies: A systematic mapping study. Information and Software Technology forthcoming. 25
THANK YOU!!
